Scott Corp in talks with RMS over Illawarra trailers

Scott Corporation is meeting New South Wales authorities on the eve of the shareholder merger vote with K&S Corporation over its new fleet of trailers.

The move has resulted in listed Scott Corp seeking a trading halt by the Australian Securities Exchange on Wednesday that ended today.

Scott Corp says Roads and Maritime Services (RMS) is "undertaking a further risk assessment in relation to the use of A-double style heavy vehicles in the NSW Illawarra region".

The new A-double fleet was commissioned for coal haulage work there late last year.

While the risk assessment is undertaken, Scott Corporation is required to operate the A-double fleet "at a suboptimal mass of 72 tonne".

The company expects the process to be completed "expeditiously" but Scott will take a net profit hit of $3.3-$3.5 million if the 72 tonne gross mass restriction applies to the end of the financial year.

"However, management will be working closely with the NSW RMS to resolve the issue as quickly as possible within the confines of our number one value – safety," Company Secretary Karl Cope says.

K&S told the market it was waiting on subsequent announcements from Scott Corp when the trading halt ensued and that advice is yet to appear.

In their independent report to shareholders on the merger released before Christmas, Leadenhall Senior Advisor Richard Norris and Director Tim Lebbon noted that unforeseen events have the potential to affect the fairness of the merger to minority shareholders.

But they noted any negative effects would also be felt by the majority shareholder in both firms, AA Scott Pty Ltd.

"We note that while we have assessed the proposed transaction as being fair, a modest change to any one of a number of our assumptions would result in the transaction not being fair," they state.

"However, non-associated shareholders who may be concerned about this should note that the main reason for this outcome is that AA Scott will receive shares in the Proposed Merged entity, which we have valued including the benefit from anticipated synergies.

"Non-associated shareholders will also benefit from the anticipated synergies, which is the primary reason we have assessed the value of a share in the proposed merged entity to be higher than market trading prices of K&S shares.

"Thus, even if we had adopted slightly different assumptions to those presented in this report, such that the proposed transaction was not fair, we would still conclude that the transaction was reasonable to non-associated shareholders."